Meta Platforms Announces a $40 Billion Share Buyback – Buyback Wednesdays

Tech giant, Meta Platforms, Inc. (META), with a $482.4 billion market cap, announced a whopping $40 billion share repurchase program representing around 10% of its market cap at announcement on February 1, 2023. Its competitor, Pinterest, Inc. (PINS) also announced a $500 million share buyback this week representing less than 3% of its market cap at announcement.

Buyback activity edged up a bit as companies have started reporting their Q4 2022 earnings. A total of 17 companies announced buybacks last week compared to 13 companies in the prior week. Eight of these 17 companies announced buybacks that equaled or crossed the $1 billion mark. ON Semiconductor Corporation (ON) and Vertex Pharmaceuticals (VRTX) announced $3 billion buybacks each representing around 9% and 4% of their market caps at announcement respectively.

Strong Financials & Profitability:

Meta has been an interesting story over the last year as concerns over advertising spending during a recession hit the entire social media group of companies hard. Meta was especially hard hit because of what was perceived as uncontrolled spending on a virtual universe project with uncertain prospects. After a more than 75% peak-to-trough decline, the stock has more than doubled from its November 2022 lows. Investors have taken solace in the fact that tech companies are reigning in spending and the stock also benefited from a rebound in technology stocks from oversold conditions. Despite this rebound, the stock is still down 13% over the last year.

Meta’s balance sheet looks strong with over $30 billion in net cash (not accounting for capital leases) at the end of December 2022. Cash generated by the company for trailing twelve months was $5.47 billion. With gross profit margin of around 80%, net income margin of 20%, return on equity of around 19% and a forward EV/EBITDA under 9, I can see why the company wants to buy back its stock despite the recent rebound in the stock. Fifteen analysts revised their earnings estimates upwards for Meta over the last 90 days.

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